COVID-19: Daily Dashboard

* LO estimate or reported figures
Sources: Bloomberg, IMF, World Bank, Lombard Odier calculations

Public health

• Covid-19 global confirmed daily cases grew at 3.8%, their slowest pace since early March, confirming the declining trend. Once again, there were widespread improvements across countries as the infection curve approaches a plateau. The global mortality rate remained stable at 6%
   
• China saw a modest rise in its daily new symptomatic and asymptomatic cases in the second half of last week, but numbers began to stabilize on 13 April. The country reported 89 new symptomatic cases, compared with 108 the previous day, of which 86 were imported while 54 new asymptomatic cases were added, included five imported. Russia seems to be the source of many new imported cases, and the country placed a lockdown on Suifenhe, a small city on the country’s northeastern border.
   
• Major European countries continued to experience a slowing trajectory of new virus cases, with daily growth rates at new lows in Germany, Italy, Spain and Switzerland since the outbreak intensified in March. Mortality growth rates have shown further signs of levelling out or even declining

• The hardest-hit European countries have extended the duration of their lockdown measures, while outlining the gradual re-opening of their economies. Spain announced a loosening of restrictions, allowing workers in “non-essential” industries to return in their jobs this week. Last week, Italy also extended its confinement measures until 3 May. France extended the national lockdown until 11 May but said schools are expected to progressively re-open after that date
   
• In the UK, the growth of confirmed cases continued to slow, to 5.1% on a daily basis, but the mortality rate has further increased to 13%, matching Italy’s. On 13 April, UK Foreign Secretary Dominic Raab announced that national restrictions would remain in place for the time being. Prime Minister Boris Johnson left hospital last week
   
• The daily growth rate of confirmed virus cases in the US slowed further, to 4.5%, while the fatality rate was stable at 4%
   
• Japan saw a material pick-up in daily new cases last week, but the country’s epidemic curve showed some hints of stabilization on 13 April. This week will be a test of the efficacy of Prime Minister Shinzo Abe’s cabinet use of the Special Measures Law for infectious diseases last week
   
• Singapore’s epidemic curve spiked significantly in the last two weeks due to the emergence of a large cluster among the country’s migrant workers who live in crowded dormitories. This is the country’s equivalent to the outbreak among South Korea’s Sincheonji religious sect, and we expect the epidemic curve to stabilize once the whole cluster is examined
   
• South Korea reported six consecutive days of daily new cases below 50, one of the three thresholds that the government has for a complete return to voluntary social distancing regime. The situations in Taiwan and Hong Kong also remain firmly under control
   
• The Asian-4 (China, South Korea, Taiwan, and Hong Kong) are not the only countries to have controlled their Covid-19 epidemic curves through social distancing and aggressive testing. Australia and New Zealand have also been able to flatten their outbreak curves substantially in recent weeks with the same approach.

Monetary and fiscal measures

• Last week’s eurogroup agreed a package, including access to European Stability Mechanism credit lines of limited size, in order to cover healthcare costs, the set-up of a loan-based facility (SURE) providing up to EUR100 billion to protect employment, and the use of European Investment Bank loan guarantees (EUR25 bn) to support Small and Medium Enterprises (SMEs). There was also a commitment to establish a Recovery Fund with innovative financial instruments to be followed up by member-states’ leaders
   
• The French government announced additional fiscal measures to address the economic downturn caused by the Covid-19 outbreak. These will increase the initial package (announced on 18 March) from EUR45 bn to a total of EUR100 bn. The government foresees that the additional spending will push the headline public deficit to 7.6% of GDP. Among the revisions to the March announcements, the cost of the simplified access to the short-term work scheme is increased from EUR8.5 bn to EUR20 bn. There were also increases for corporate tax and social contribution deferrals, provisions for a 'Solidarity Fund' aimed at providing financial support to SMEs, and additional public spending for the health and medical sector
   
• The US Federal Reserve unleashed another round of USD2.3 trillion emergency measures to aid and stabilize SMEs, state and local governments, and expanded asset purchases of high yield bonds, high-yield Exchange Traded Funds (ETFs), Collateralized Loan Obligations (CLO), and Commercial Mortage-Backed Securities (CMBS). This is in addition to its 23 March announcement, that included unlimited quantitative easing to keep borrowing costs for Treasuries and agency Mortgage-Backed Securities (MBS) at low levels, an investment grade (IG) corporate credit facility to purchase IG corporate bonds, loans, ETFs and facilities to include CMBS, Asset-Backed Securities (ABS) and municipal paper. The details are as follows:
  • USD500 bn Municipal Liquidity Facility to lend to state and local governments. The US Treasury will provide USD35 bn in credit protection to the facility through the CARES Act
  • USD600 bn Main Street Lending Program to ensure credit flows to SMEs. The US Treasury will provide USD75 bn in equity to the facility through the CARES Act. Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers, and follow compensation, stock repurchase, and dividend restrictions under the CARES Act
  • USD300 bn Primary and Secondary Market Corporate Credit Facilities and the term loan facility to buy ABS securities to USD850 bn (backed by USD85 bn in credit protection from the US Treasury) and also include asset purchases of high yield bonds, high yield ETFs, CLOs, and CMBS securities
  • Pay check Protection Program Liquidity Facility supplying liquidity to lending institutions through term financing backed by PPP loans to small businesses. Eligible banks have to retain 5% stake in the loan. Firms that have taken advantage of the PPP may also take out Main Street loans
     
• US policymakers are negotiating a potential UISD1 trillion ‘Phase 4’ bipartisan bill that expands on the CARES Act. In addition, given the economic challenges for small business, Congress is currently negotiating a smaller package (Phase 3.5) focused on small businesses. The Phase 4 plan may include funding for healthcare and emergency preparedness measures including PPE (personal protective equipment) for healthcare and other frontline workers, further assistance for state and local governments, and additional support programs including expanded direct payments to individuals and unemployment insurance
   
• This is the most coordinated fiscal and monetary policy response in our lifetimes, and that the CARES Act sailed through the Senate (96-0) and by voice vote in the House tells us that there strong political legitimacy behind the Fed’s actions

• Oil-producing nations reached a deal on 12 April to cut output by about 10 million barrels a day, temporarily pausing the price war between Russia and Saudi Arabia. This cut in supply has to be seen against demand destruction, given ongoing confinement measures, which mean that its impact on the global oil balances could take a while to be seen. We see pressure on oil prices in the near term remaining to the downside.

Economic impact

• Inflation in the US came in weak on 10 April last week. Inflation weakness is likely to continue for a variety of reasons. First, inflation has always been a lagging indicator. Growth slows first and weaker inflation follows. Second, because the pandemic is global, a drop in risk appetite has sent the dollar exchange rate upward, which will limit imported inflation. Third, weak global growth implies less commodity demand, likely resulting in declines in household energy prices. Fourth, given the increase in unemployment, it will likely be some time before we are faced with capacity constraints in the US labour market, since they were not visible even at 3.5% unemployment.

Portfolio positioning

• The trend has turned more positive in the past days, but we do not believe that all the conditions for a sustained equity market rally are in place just yet. We continue to monitor the slowdown in European and US infection rates and the likelihood of a second wave of infections in Asia. Market attention will gradually shift away from the outbreak and towards exit strategies and the economic impact. There are both negative and positive catalysts ahead: positive Covid-19 developments may be mitigated by worrisome news flow including weak economic data, dividend cuts and credit rating downgrades
   
• We continue to adjust our portfolio exposures. Most recently, we have increased exposure to policy-backed, undervalued assets, such as investment-grade credit
   
• We have also readjusted our global equity exposure in line with our tactical targets, and rebalanced our regional equity allocation by reducing our position in global emerging markets and increasing exposure to Asian equity markets. We have taken profit on the short leg of the put spread trade.

Three levels of response to contain the current shock to H1 2020, limit defaults, and avoid an unemployment spiral
 

•  A public health response: to contain the spread of the virus, and gain time so that cases do not overwhelm hospital capacity
   
• A monetary response: to avoid a funding shortage and ensure liquidity at a cheap borrowing cost
   
• A fiscal response: perhaps in the form of tax rebates or income transfers, to partially shield economic actors from the temporary blow.

* LO estimate or reported figures
Sources: Bloomberg, IMF, World Bank, Lombard Odier calculations

Public health

• Thailand, Malaysia and South Africa show confirmed cases growing by up to 5% daily
   
• Several EM countries are still recording 10% or more daily growth rates: India, Indonesia, Mexico, Brazil, Colombia, Turkey and Russia. Of these, only Indonesia and Colombia show a rising rate of infection (where current growth rates are higher compared with last week)
   
• Turkey and Chile show the highest level of confirmed cases per unit of population and Turkey is showing, by far, the highest number of deaths per unit of population at 9 deaths per million persons
   
• There are concerns over data quality for many EM economies. For example, Mexico’s Ministry of Health has suggested that the total number of confirmed cases could be as high as 26,000 compared with the WHO’s reported figure of 4,200. This is a concern, given that Mexico’s response to the crisis has been more timid than peers

• India’s lockdown, initially set to last three weeks until 14 April, has been extended until 3 May. India is seeking to resume road construction in districts least impacted by the coronavirus
• Turkish Interior Minister Suleyman Soylu called a snap national lockdown with two hours’ notice over the weekend, which led to a rush of panic buying. Turkey reported 97 new coronavirus fatalities on 12 April, bringing the death toll to 1,198. The government has reported about 57,000 confirmed cases.

Monetary and fiscal measures

• Over the past month, EM central banks have cut rates and implemented measures to support the local bond markets via secondary market purchases. Some countries such as Brazil and Colombia are studying quantitative easing-type measures. Most countries, except for Mexico and South Africa, have announced clear fiscal responses (see dashboard table details). Some central banks are pre-emptively moving: on 10 April, Peru’s central bank brought forward its rate decision, originally scheduled for 16 April, and cut rates by 100 basis points to 0.25%

• Bank Indonesia meets today, with the central bank expected to cut interest rates by 25bps to 4.25% from 4.50%. This follows 50bp in easing already provided in recent months
   
• This week in Brazil, the Senate is expected to vote on a constitutional amendment that allows for a war budget for coronavirus-related expenditures, and allows the central bank to engage in QE-like operations. Lower house lawmakers will debate further relief to cash-strapped regional governments.

Economic impact

• Consensus expectations for EM growth have been slashed. Using a weighted average of growth for Brazil, Russia, India, Indonesia and South Africa, growth is now forecast to slow to 1.60% in 2020, down from 3.50% in 2019. Brazil, Russia and South Africa are forecast to contract this year
   
• China’s trade performed better than expected in March, with both exports and imports declining less than expected even as the coronavirus prompted business shutdowns around the world. Exports declined 6.6% in dollar terms in March from a year earlier, while imports fell 0.9%, the customs administration said Tuesday. Economists had forecast that exports would decline by 13.9% while imports would shrink by 9.8%. The trade balance narrowed to $19.9 billion in the month.

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